US Sanctions on Russia Could Impact Israeli Economy

The Israeli economy, the high tech sector in particular, is vulnerable to the effects of American sanctions on Russian investors, Globes said on Sunday.

Yuval Sasson who heads compliance at the Meitar law firm told the financial daily that Israel could suffer if the fighting continues and the sanctions are implemented:

“Although we are still in the midst of the event, there is still no doubt that as long as the sanctions will continue, there will be dramatic implications for Israeli industry. All partnerships with a Russian investor, even if we are talking about minority stakes, even if not imposed upon them personally, might influence the ability of the company to function in the future. When the Americans impose sanctions, they relate to it seriously and the enforcement can be very painful, so caution must be exercised.”

The highest-profile example is that of Roman Abramovich, a Russian billionaire with ties to Vladimir Putin (which he denies) and the holder of an Israeli passport. The potential fallout from sanctions that fall on Abramovich are such that Yad Vashem, the Ashkenazi chief Rabbi of Israel and a few other worthies wrote a letter to U.S. Ambassador to Israel Tom Nides appealing for an exception for Abramaovich, who is, among other things a major donor to Yad Vashem.

The other things include investments in Israeli tech companies, including mobility solutions company Via Transportation, media engagement platform Open Web and electric vehicle fast charging battery developer StoreDot, according to IVC Research.

Abramovich made news when he took the precautionary measure of putting a British soccer team that he owns into the hands of a charitable trust.

Adv. Ami Ben-Yacov, who has been involved in many financing rounds for Israeli startups from Russian and Belarus investors, commented: “It is possible that as in the case of [the soccer club], the entrepreneurs will ask the Russian investors to manage their investments through a blind trustee. In such a case a Chinese wall is created around the information between the company and its investors, while protecting all the economic rights of the investor.”

One senior Russian investor explained that most Russian investments are in a minority stake. “The investments are a result of the years in which startups benefited from this capital, which was easy to obtain. Now we see high-tech entrepreneurs understanding that follow-on money from their investors will be difficult to receive. Many of them are beginning to think how to dilute, or sell these shares.”